Real Estate Market Posts Improvement in First Half of 2018

Absorption of Grade A and B office space in Nairobi rose by 12 percent in the first half of the year compared to the second half of 2017, according to Knight Frank’s Kenya Market Update.

Increased uptake of office space followed the improved political climate and economic recovery in the period, with the country’s Gross Domestic Product (GDP) having expanded by 5.7 percent in the first quarter. A decline in prime asking rents for offices to US$1.3 per square meter per month, from US$1.4/sqm/m in the latter half of 2017, also boosted uptake.

The Kenya Market Update report showed prime residential prices increased marginally by 0.4 percent in the period compared to a 1.8 percent decrease in the second half of 2017, while prime residential rents rose by 0.33 percent.

“The increase in prime residential prices and rents is attributed to an improved political climate and the thawing of the wait-and-see attitude among buyers and occupiers,” the report notes.

In retail, prime rents remained flat at US$55/sqm/month, with footfall in major shopping malls have increased slightly in the review period as expanding retailers took up anchor tenant spaces vacated by ailing rivals. Occupancy levels remained high for established malls at 90 percent and between 60-75 percent for new retail centers.

Over the last 20 years, in Nairobi, office rents in the Westlands commercial district have grown the fastest, having climbed by nearly two and a half times the 1998 levels, according to data compiled by Knight Frank Kenya.

Office rents in Westlands stood at about 35 shillings per square foot per month in 1998, and currently average Sh120/sqft/m, a 242 percent increase. In comparison, average office rents in Upper Hill have increased by 175 percent over the two decades, from Sh40/sqft/m in 1998 to around Sh110/sqft/m in 2018.

Land values have increased most significantly in Karen, from an average of 2 million shillings per acre in 1998 to 65 million shillings currently, a more than 32-fold growth. Comparably, Upper Hill land prices averaged 20 million shillings an acre 20 years ago and have risen to about 600 million shillings per acre today.

Knight Frank Kenya’s Managing Director Ben Woodhams noted that the property market had changed tremendously over the last two decades leading to sky-rocketing of land values.

“A whole shopping center culture has evolved across the country over that time, and Nairobi’s skyline has been completely transformed by new developments,” said Woodhams.